Solar demand in US near inflection point for massive growth, says Keiser Analytics

A unique bottom-up analysis of retail electricity prices across the US by Keiser Analytics paints an incredible picture of the potential adoption of solar power at the residential and commercial level as installation costs fall to reach retail grid parity and below. Should the inflection point be released, US solar module demand could top 100GW over the next 5-years, compared to the expected 2011 demand of approximately 2GW.

“While the recent price declines of solar PV equipment are well known, what is less appreciated is the size and distribution of U.S. electricity consumption,” noted Richard Keiser, former analyst at Sanford Bernstein and now President of Keiser Analytics. “First, the United States consumes approximately 4 trillion kilowatt hours of electricity per year, more than all of Europe combined. Second, U.S. electricity prices are distributed in a bell-shaped curve with the apex at $0.10/kWh. Moving from along that curve from higher prices toward the center, consumption increases exponentially beginning at US$0.18/kWh. As solar PV electricity costs reach that level and below, the potential demand for solar PV will also increase exponentially.”

The report highlights that most residential and commercial PV installations in US over the last few years (2010-11) have cost between US$5 and US$8 per watt, while remaining above the retail price of electricity paid by most consumers across a diverse number of electricity providers and irradiance levels.

The well documented fall in module prices and installations costs is bringing PV pricing into the US$3-US$5 per watt range for residential installations, while some commercial installations in the US are already below US$3 per watt. An inflection point of massive proportions is therefore looming fast in the US, according to Keiser Analytics.

“We are about to cross an inflection point for solar PV demand in the United States,” added Keiser. “Over 400 billion kWh of U.S. electricity is consumed between US$0.15 and US$0.20 per kilowatt hour. As solar PV installation costs trend below US$4, businesses and residents paying prices in this range will be able to save money by installing solar installations on their premises.”

The new report looked at the retail price of electricity across all US States from U.S. Energy Information Association (EIA), with state-level irradiation data from NREL. The data were analyzed segment by segment, state by state, to determine the points at which the NPV of a solar PV investment becomes positive relative to the NPV of electricity purchases from the utility. The U.S. federal Investment Tax Credit was included in the analysis; all state- and local-level incentives were excluded.
“Solar competitiveness—the point at which a business or a resident can save money by installing a solar PV array—is determined by these three factors and the retail price of electricity. Because both electricity prices and irradiation vary by region, the analysis must be done on a market-by-market basis,” noted Keiser.

The analysis calculates the amount of electricity that could be economically served by distributed solar PV at different price points.

So far the US market demand for PV has the ability to support installations of between 2-5GW of capacity, based on installation costs in the US$5-US$6 per watt range, less than 1% of electricity generation in the country. US PV capacity is expected to reach approximately 4GW at the end of 2011.

However, as the installed cost decreases to US$4 per watt, 2% of US electricity needs could be economically viable. But the key cost level is at US$3 per watt, when approximately 17% of U.S. electricity could be economically served by solar PV, according to the report. This is equivalent to over 300GW of solar PV capacity, according to the analysis by Keiser.

Now that the PV industry has unquestionably entered a new growth phase, all eyes are on which technologies will win through into the mainstream of PV manufacturing. PERC, n-type, p-type bifacial, heterojunction – all have become familiar terms in the ever-growing constellation of solar cell technologies. The question is which will offer manufacturers what they are looking for in improving efficiencies and cutting costs.

Although the past few years have proved extremely testing for PV equipment manufacturers, falling module prices have driven solar end-market demand to previously unseen levels. That demand is now starting to be felt by manufacturers, to the extent that leading companies are starting to talk about serious capacity expansions later this year and into 2015. This means that the next 12 months will be a critical period if companies throughout the supply chain are to take full advantage of the PV industry’s next growth phase.